Changing the future of P2P loans with FinTech

As financial technology (FinTech) continues to advance at lightning speeds, experts are wondering if traditional banks could soon be going the way of the dinosaurs. We're already using our camera phones to deposit our cheques, moving money between accounts with our banking apps, and paying our friends, entrepreneurs, and freelancers with Paypal and Google Wallet to name a few.

The last great frontier in FinTech is loans. Many people still believe that they need to trudge to their bank to apply for a loan and then wait days, even weeks, to hear if they've been approved. But FinTech is already making tremendous strides in changing the future of loans, especially with the growing public popularity of P2P loans. Keep reading to learn all about P2P loans, how they're breaking down borders created by traditional banks, and why that's a good thing.

What is a P2P loan?

A peer-to-peer (P2P) loan is granted without a bank's involvement. Instead, borrowers are matched with lenders over an online platform. Some of the most well-known P2P loan companies in FinTech are LendingClub, Prosper, Funding Circle, and Jimubox. The practice of P2P loans is sometimes referred to as social lending or crowdlending, too. This type of loan is most popular among small businesses and individuals looking for a personal loan.

The benefits of FinTech loans

FinTech loans boast a wide array of benefits to lenders and borrowers alike, which is why they're the second most funded sector in FinTech after payment companies. As of 2018, P2P loans are already gaining traction with millennials, but international citizens of all ages stand to benefit from these loans as well, whether they're looking to pay off a credit card, fund a medical surgery, or go back to school. So, let's break down the most valued aspects of P2P loans:

• Faster approval — A significant downside of traditional bank loans is their slow approval speeds. If you or a family member has been injured and you need immediate help paying for medical expenses, a loan with a long lag time between applying and approval won't cut it. FinTech's P2P loans are known for their quick decisions. You can often know within 24 hours if your loan request has been granted.
• Lower interest rates — P2P loans typically have much lower interest rates than loans issued by traditional banks, which makes them all the more appealing to students, young professionals, and families with lower incomes. Student loan companies like Prodigy Finance and Future Finance are gaining swift popularity in the UK and Ireland by allowing students to earn their degrees without falling prey to higher interest rates and the immediate pressure to repay their loan. Instead of evaluating on a student's credit score alone, many of these P2P lenders evaluate the individual's degree program and take into consideration their predicted future income upon completion.
• Get money for your ideas — Crowdfunding is arguably the most well-known type of P2P loan. An entrepreneur with a hot new idea puts their vision up on a platform, like Kickstarter or Indiegogo, and then watches as the money rolls in from interested lenders. Once they've earned the funding and gone away to create their new product, they're expected to distribute the product to investors as a form of loan repayment.

These are just some of the many, many benefits of FinTech loans. To see these P2P loans in action for yourself, try them out next time you're looking for a personal loan or extra funding for your small business.